Japan inflation fell 1.2% year over year in December after falling 0.9% in November as the coronavirus pandemic continues to be a drag on consumption, the Internal Affairs and Communications Ministry said Friday.
The decline was bigger than expected and was the steepest since April 2010. Prices were mainly pressured by utilities which were down 6.1%, food which was down 0.8% and transportation and communication which was off 1.1%.
Meanwhile, prices for medical care fell again by 0.4%.
On a monthly basis, consumer prices dropped 0.3% after declining 0.5%. Core consumer prices, which exclude fresh food, dropped 1.0% on the year, the ministry said.
In related news, Japan's economy will suffer a much bigger contraction than initially expected in the January-March quarter, as an extended state of emergency to contain the coronavirus pandemic hurt corporate and household spending, a Reuters poll found.
A majority of analysts said whether or not Tokyo proceeds with the Olympic Games this year would have little impact on the economy either way, as many large construction projects have already been completed and spectator numbers may be limited.
The world's third-largest economy is expected to have shrunk an annualized 5.0% in the current quarter, the Feb. 1-Feb. 10 poll of 37 economists showed, double a 2.4% contraction projected last month.
The downgrade is largely due to the government's decision in January to roll out renewed restrictions to combat a rise in infections in Tokyo and several other prefectures.
